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How Crucial is the Role of Renewable Energy in Pursuing Affordable and Clean Electricity in ASEAN?

Nadhilah Shani & Rifa Fadilla
28 January 2021

How Crucial is the Role of Renewable Energy in Pursuing Affordable and Clean Electricity in ASEAN?

Electricity demand in Southeast Asia is expected to soar for years to come. The newly published 6th ASEAN Energy Outlook foresees that based on the baseline scenario—in which ASEAN’s energy systems continue to develop along historical trends in a business-as-usual scenario—residential electricity demand will increase to 491 TWh by 2040, which is twice the demand in 2017.

While economic growth is one of the main drivers of the surge in demand, efforts to increase the electrification rate to 100 per cent and to provide affordable access to electricity are other drivers.

To generate a larger capacity of electricity and keep up with electrification rate targets, ASEAN member states (AMS) still heavily rely on fossil fuels and projections say that this reliance is here to stay.

The 6th ASEAN Energy Outlook (AEO6) projects that by 2025, coal power plants will still account for around 37% for a total of power generation capacity installed in ASEAN, followed by natural gas power plants (28%) and oil (3%).

But the reliance on fossil fuels has contributed to around 60% of the total greenhouse gas emission, which could lead to multiple health issues, including respiratory problems. A publication from the World Health Organization has found that 7 million people die prematurely every year due to air pollution. Hence, having clean electricity is a must.

Currently, ASEAN is embracing the energy transition towards affordable and clean electricity to encourage and support economic activities. However, it is not always easy to find a good balance between providing affordable and clean at the same time. Most of the time affordability is put in front before clean to prioritise. The solution to ensure the affordability of electricity commonly ends up utilising the current least-cost option of energy supply, which makes a justification for continuing the reliance on fossil fuels. Although fossil fuels technologies are making some progress to be cleaner, it is not enough to catch up with the climate target, as noted in the Paris Agreement.

ASEAN’s reliance on fossil fuels should be significantly reduced to prevent the risks of financial lock-in from the stranded asset in the future. Moreover, fossil fuels cannot be the solution for the last mile electrification as it will not reduce the cost of electricity in rural and remote areas, due to the fact that it has an unstable supply chain and high transport cost.

Source: ASEAN Centre for Energy data collection

The ASEAN Member States have quite a diverse range of electricity prices. Some may have lower prices due to subsidies, incentive programmes or the availability of cheap resources. However, the variety of electricity tariff across the region tells us another story that to those who have expensive household electricity rates, may have challenges on its power infrastructure or local resources. Taking Cambodia as an example, its high urban and rural electricity tariffs are caused by their power infrastructure, which are still dominated by isolated, inefficient generation and distribution systems powered by diesel and heavy fuel oil.

Based on the data from PYC Data Center, household electricity price is highest in most AMS countries in both urban or rural areas, compared to other sectors such as industry. Despite the diverse price range, most rural and remote areas in ASEAN still struggle with expensive electricity prices although households account for the smallest consumption. This expensive electricity cost is due to the need for complicated power system infrastructure to overcome the geographical challenges and limited access to energy supplies.

How can renewable energy be a solution to rural electrification?
Renewable energy has been hailed as the solution to these problems. International Renewable Agency (IRENA) has found that the cost of renewable energy has the potential to go head-to-head with fossil fuels, and is increasingly cheaper than new and existing fossil fuel-fired plants.

RE is also capable of providing affordable electricity prices for remote areas due to its descending electricity price. Over the last 10 years, renewable energy price has declined rapidly—offshore wind has declined by 29%, followed by onshore wind by 39%, concentrating solar power (CSP) by 47%, and solar photovoltaics by 82%.

The data from IRENA also revealed that 56% of capacity additions from utility-scale renewable power in 2019 had lower electricity costs than the cheapest new coal-fired power plant. Renewable energy has the potential savings of US$ 23 billion annually, if the costliest 500 GW existing coal plants were replaced by solar and wind.

Moreover, RE triumphs fossil fuels as it is decentralized and highly scalable, as most of the RE projects are standalone systems independent of the main grid. In most cases, rural electricity is expensive due to the high transport cost of fuel to remote places, and a standalone system of renewable energy bypasses these costs.

Reliability is also often a challenge as well in remote places where stable electricity supply is only available for several hours. This worsens when the fuel supply chain is interrupted during extreme weather.

If RE is used, this risk could be minimized as the resource of energy such as solar and wind is always available when combined with storage systems. Plummeting prices of energy storage such as batteries could be another driver to escalate RE implementation for rural and remote areas.

However, knowledge transfer to local communities is a must when commissioning a new renewable energy project. To maintain the renewable energy facilities, local communities must be familiar with the new systems and have knowledge of basic troubleshooting when errors occur.

Policy is key for the implementation of renewable energy for rural electrification

Electrification in rural and remote areas faces critical challenges due to its need for complicated infrastructure and equipment delivery. However, such hassles can be prevented by developing a standalone system of RE instead, which could remove the costly transmission to the main grid.

To enable this and accelerate rural electrification, the government could give support by implementing policies that expand the investing windows for the private sector to take part in implementing RE microgrid and off-grid power trade.

Incentivizing this sector is as important as incentivising the renewable energy technologies itself, not only in utility-scale RE, but also for the off-grid RE market. This way, the last mile electrification burden in the country is shared between the government and private sector, which hopefully speeds up the process. Lastly, when policy support and off-grid RE market are in place, hopefully all ASEAN remote communities can afford and have access to electricity to enhance their living standards.

The original article can be found here.

Pic by Michal Jarmoluk on Pixabay.